Carlyle exits China Pacific with $4b profit

Two years later, Carlyle took its equity commitment to nearly $800 million as part of a broader restructuring effort and ended up owning 19.9% of China Pacific Insurance itself. With the exception of Newbridge Capital and Shenzhen Development Bank (SDB) - where the former took a close to 18% stake plus management control in late 2004 - no private equity firm has managed to secure a similar size stake in a Chinese financial institution.

China Pacific was in distress when the door was opened to foreign investors, though arguably not to the same extent as SDB. It was the country's third largest life insurer but insolvent and losing money, the business kept afloat by accommodating government shareholders.

"We knew the company had great potential but a lot of work had to be done," X.D. Yang, head of the private equity firm's Asia buyout operations, told AVCJ last year. "We spent a fair amount of time explaining what Carlyle is. That was a good process for the two sides to get to know each other and I have to give credit to China Pacific's management for recognizing that a global firm like Carlyle could make a difference to their business."

A reorganized China Pacific went public in Shanghai in 2007 and in Hong Kong two years later. Last week Carlyle sold its remaining equity stake in the company, having accumulated more than $5 billion through six block trades since December 2010. It is thought to be one of the private equity firm's largest ever cash exits globally.

The final trade saw 203.7 million shares - 2.2% of China Pacific's overall share capital - sold at HK$30.30 apiece for a total of $796 million. The lock-up on Carlyle's holding expired in October but delaying the exit until January allowed the private equity firm to take advantage of a recent surge in Chinese stock prices.

"Over [more than seven] years, we have worked very closely with the company, company management and other shareholders in support of transforming China Pacific into one of the best run and most successful insurance companies in China and a Fortune Global 500 company," Yang said in response to the final exit.

China Pacific was the last remaining portfolio company of Carlyle Asia Partners, the private equity firm's debut regional buyout fund, which launched in 1999 and raised $750 million. California Public Employees' Retirement System (CalPERS) was among the LPs, putting in $75 million. According to the pension system's records, as of June 2012, the fund a net IRR of 18.3% and an investment multiple of 2.73x.

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• Topics
• Exits
• Financials
• Greater China
• The Carlyle Group
• Financial Services
• Exit
• China